Key Takeaways
- U.S.-traded shares of Temu parent PDD Holdings plunged 29% on Monday after the China-based online retailer posted revenue that came in below expectations amid intensifying competition.
- Investors fret that profitability may slow as the company increases investments to scale its business.
- PDD shares broke down from a rising wedge on above-average trading volume, indicating selling participation by institutional investors.
- Investors may look for buying opportunities at key support levels including $99, $74, $54, and $45.
U.S.-traded shares in Temu parent PDD Holdings (PDD) plunged 29% on Monday after the China-based online retailer posted revenue that came in below expectations amid intensifying competition.
The company, whose American depositary receipts have still gained about 25% over the past year despite Monday’s drop, has grown rapidly to challenge e-commerce giant Amazon (AMZN), and Chinese rivals Alibaba (BABA) and JD.com (JD). However, investors now fret that profitability may slow as the company increases investments to scale its business.
Below, we zoom out by taking a look at PDD’s weekly chart and use technical analysis to identify important price levels where investors may look for buying opportunities.
Breakdown From Rising Wedge
Since bottoming out in March 2022, PDD shares trended higher within a rising wedge before Monday’s significant breakdown below the pattern’s lower trendline. Importantly, the move occurred on above-average trading volume, indicating active participation by institutional investors.
Amid the stock’s plunge, investors should monitor four key areas on the chart where bargain hunters may look for lower entry points.
Monitor These Key Support Areas
The first sits around $99 in close vicinity to the 200-week moving average, an area where the shares could encounter support near a horizontal line that connects a series of comparable trading levels from July 2020 to October last year. It’s worth noting that the stock fell below this closely watched technical level in Monday’s trading session before reclaiming it by the closing bell.
An inability to hold this level could see the shares fall to $74, a location on the chart where they may attract buying interest near a trendline that links multiple peaks and troughs between October 2020 and July last year.
Further bearish price action could drive a sell-off down to the $54 area, where the shares would likely garner support near the lower portion of a consolidation period that formed on the chart between December 2021 and February 2022 toward the end of a multi-month down trending move.
Finally, a more significant decline could see the stock revisit lower support around $45, where buyers may seek entries near the prominent November 2019 swing high, which also roughly aligns with the April 2022 countertrend peak and August 2022 swing low.
PDD shares were down 0.8% at $99.22 in premarket trading Tuesday about two hours before the opening bell.
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As of the date this article was written, the author does not own any of the above securities.